Addressing Biosimilars: Federal Legislation for a Pathway

1. Addressing Biosimilars: Federal Legislation for a Pathway May 28, 2009 Kerry A. Flynn Shire Human Genetic Therapies, Inc.

2. Shire Human Genetic Therapies, Inc. • Specialty pharmaceutical company with a range of products on the market for Attention Deficit and Hyperactivity Disorder (ADHD), gastrointestinal (GI) and therapies for human genetic diseases • Shire Human Genetic Therapies business unit pursues treatments for patients and families facing such rare (“Orphan” or “Ultra-Orphan”) diseases as Fabry disease, Hunter syndrome, Gaucher disease, hereditary angioedema, and metachromatic leukodystrophy

3. Hot topics: • Data Exclusivity • Regulatory Pathway • Patent Issues

4. Data Exclusivity Periods: Considerations • Biosimilar may be similar enough to a pioneer biologic for regulatory approval purposes, but different enough to avoid the innovator's patents • New therapies will never be developed for some addressable diseases • The current orphan incentives mean that the development of a therapy for some diseases will never yield a return • Lower commercial returns for similar development costs • Prospective commercial returns for orphan biologics are much lower than for other biologic drugs due to the significantly smaller addressable patient populations. Any future pricing pressure will reduce incentives further • Magnifies risk of failure (lower portfolio profits to cover failed products)

5. Data Exclusivity: Considerations (Cont’d) • Large orphan markets have already been addressed • Many of the larger orphan markets already have approved and effective therapies (‘low hanging fruit has gone’) • Greater commercial risks in remaining markets • Remaining markets include diseases with high morbidity where there is little ability to understand a drug’s impact on life expectancy (a key driver of commercial return) prior to pivotal trials (ie. after much of the investment has been made) • In order to preserve innovation for orphan drugs in the future (and in an environment of tighter pricing), exclusivity periods need to be longer (than for non-orphans) to compensate innovators for increased development and commercial risks in these challenging markets

6. Theoretical market model analysis • Theoretical product development / commercialisation model • Range determined for key variables • Peak sales - $100m-$500m • COGS – 12%-15% (implicitly captures facility investment) • S&M % sales – 10%-20% • Total development costs over 9-year period - $150m - $300m • CMR biotech PoS benchmarks • Other assumptions kept fixed • Discount rate – 11.5% • Tax rate – 30% • Working capital – 20% of y.o.y change in sales • Ranges of key variables were simulated using uniform distribution assumption • Assumes that each value in the range is equally likely • Simulated eNPV after defined periods of exclusivity assuming terminal perpetuity decline rate of 50% post exclusivity expiry • Analysed % of outcomes where eNPVs were positive for different exclusivity assumptions

7. 60% of hypothesized outcomes never make a return with 7 years of exclusivity • Peak sales range ($100m-$500m) • Reflects market size for vast majority of small orphan diseases • Excludes large orphan markets (>$500m) • ~60% of outcomes never generate a return assuming a 7 year exclusivity period • ~35% of outcomes never generate a return assuming a 12 year exclusivity period Peak sales range $100m - $500m

8. Duration of Patent and Regulatory Exclusivity Peak sales range ($m) 2013** ELAPRASE* (500-600) 2019 2011 REPLAGAL EU* (300-350) 2020 FIRAZYR EU* (350-400)# 2018 2009 2000 2005 2010 2015 2020 2025 Patent Term Regulatory Exclusivity *Orphan Drug ** Regulatory Exclusivity in EU until 2017 # Assuming US approval

9. Regulatory Pathways: Considerations • clinical trial evidence and data are fundamental for evaluating and demonstrating the safety and effectiveness of a follow-on biologic, and must be conducted on a product-by-product basis • Avoid constraints on the scientific conclusions FDA can reach in evaluating the similarity or comparability of follow-on biologics • Trade secret and confidential commercial data and information of an innovator must be protected

10. Patent : Considerations • Must not limit constitutional or statutory rights of patent holders to protect against infringement • Patent challenge involving the follow-on biologic product must be litigated prior to marketing approval of the follow-on product • No special patent litigation rules that favor follow-on biologics manufacturers • Interplay between Orphan drug legislation (“Same product”), Biosimilar legislation (“similar product”) and Patent legislation (“literal infringement/doctrine of equivalents”)

11. Patent considerations • Biotechnology processes define product • Yeast fermentation • Budweiser • Amstel • Heineken • Molson • Are these products equivalent? Similar?

12. Hormone Res. Foundation v. Genentech, 904 F. 2d 1558 (Fed. Cir. 1990) • Patent • Accused hGH product differed by two amino acids from claimed product • CAFC held no literal infringement • Regulatory • Would product be similar enough to be approved as a Biosimilar? • Orphan • Is it the “same drug”? rhGH found to be “different drug” than pituitary derived hGH

13. Amgen v. Hoechst Marion Roussel (EPO cases) • Patent • Patent claimed 166 aa mature sequence • Accused product had 165 • No literal infringement • Infringement under doctrine of equivalents • Regulatory • Products similar?

14. Conclusion: • Legislation must: • Provide adequate incentives for development of orphan biologics • Not abrogate the rights of patent holders • Rely on scientific evidence